From farmers to bitcoins, Mexican fintechs drive change

El Buen Socio was founded in December 2013 with the idea of making a difference in Mexico. “Our main purpose is to serve an ever-growing segment of smallholder farmers in Mexico who are working their land with environmentally sustainable practices and generating a positive social impact in their communities, but who nevertheless are left out of the traditional financial system and private investing because of their lack of ‘attractiveness’ and relatively low returns,” Karla Breceda, founder and CEO of El Buen Socio, tells me.

“In 2014, only six per cent of the adult population living in rural areas had access to credit through a traditional banking institution. In a country in which agriculture represents 3.5 per cent of GDP and 13 per cent of the national employment rate, it is clear that there is an underserved market with the potential to create profitable rural ventures, with strong environmental and social impacts in marginalized and extremely poor communities,” she adds.

The startup works closely with NGOs and other organizations already present in these remote areas. These partnerships allow El Buen Socio to identify potential customers and to mitigate risk. With the support of grant-giving organization the MetLife Foundation, for example, the company has developed a credit scoring model for rural entrepreneurs without financial information, based on personality, community and psychometric data. According to Breceda, the model is being tested and the first results should come out early in 2017. Since it was founded, El Buen Socio has disbursed more than US$60,000 in 55 loans, 20 of them in indigenous and extremely poor communities.

“It has been proved that financial inclusion helps alleviate poverty, increase productivity and generate economic growth in any given country,” Breceda says with enthusiasm. “In Mexico, credit penetration barely reaches 23% of GDP. By creating new fintech companies with the ability to use technology in order to reach more people and with lower costs, we can ignite change, serve the underserved and bank the unbankable. Not only will people’s lives improve, but also the Mexican economy can take advantage of a whole new way of satisfying people’s needs and moving towards development.”

P2P lending and bitcoin

Launched in 2012, the online peer-to-peer lending platform Prestadero was also born to exploit opportunities generated by failures of the traditional banking system, more specifically high-rate consumer loans and poor performance investments. For those who wants to borrow money, all you need to do is sign in and apply for credit and the platform will check if you are creditworthy. For those interested in lending, the platform costs just 250 Mexican pesos per request. The idea is that the lender will diversify their money via different loans, minimizing risks and increasing returns. The company also promises no headaches for those using the platform as an alternative to traditional investments. The website says: “Prestadero filters loan applicants, assigns the loan rate, generates credit agreements and Prestadero is responsible for the collection of both current loans and non-performing loans.”

Founded in 2014, Bitso is the country’s first platform for buying and selling bitcoin with Mexican pesos. The startup already has 14,0000 users, mainly Mexican males, between 25 and 35 years old.

“Eighty per cent have at least a bachelor’s degree,” Daniel Vogel, co-founder and president of Bitso, tells me. “Our users range from experts in bitcoin/blockchain to newcomers who, prior to Bitso, had no exposure to the technology. We try to explain clearly what bitcoin and blockchain are. We have a White Paper marketing campaign aimed at educating our users. And we also host a wide variety of other educational activities, such as meetups, talks and social media engagement.”

The dream of transformation seems to be just everywhere in Mexico and is boosting innovation in the fintech scene. When asked about the best and the worst aspects of creating a startup in Mexico, Vogel first makes the caveat that this is his personal view, not the company’s. And goes ahead: “The best thing is waking up in the mornings constantly re-envisioning and re-thinking how financial services should be built and accessed in a country that lacks financial infrastructure. The worst is that we are building a business in a country with a horribly underdeveloped entrepreneurship ecosystem. This makes several things very difficult: raising capital, navigating bureaucracy, getting proper mentorship, for example.”

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